A month after we first noted the major redemptions at Avenue Capital Group's credit fund (note this is a different fund from Third Avenue), and just one trading day after CEO Marc Lasry strolled arrogantly on to CNBC and told the public that "I don't think it's a time to panic, I think it's actually a time where you've got opportunities out there," Morningstar reports the Avenue Credit Strategies Fund has failed to report asset levels since about mid-December.
As we noted first in mid-December...
What is just as surprising is that among its investments, Lasry does have a mutual fund, in fact two of them - the Avenue Credit Strategies Funds, an open- and close-ended fund, which as we first showed last Friday using the following Morningstar table, are not only among the worst performers year to date, but have tumbled by a whopping 9% in the past three months.
Fast forward to last night when according to Reuters, Avenue's founder, billionaire Marc Lasry, was forced on Monday to back the junk bond mutual fund hemorrhaging assets at his Avenue Capital Group "as jittery investors exit high-yield bonds amid a market rout."As a result, the size of the fund has been cut by more than half, sliding from $2 billion to just $884 million according to Lipper, roughly the same size where Third Avenue's own high yield fund was when it announced it would liquidate and gate investors.
Despite his defensive posture, Lasry hardly sounded too enthusiastic about the pace of outflows: "I think overall redemptions at some point are going to slow down across the market," Lasry said. "I'm not sure if that will be tomorrow or next week, but people are going to start putting money back into the market at some point."
And then just last Friday, CEO Lasry ventures on to CNBC to calm the panic and claim all is well as his fund was imploding...
...despite recent worries, Lasry struck a cautiously optimistic tone on the U.S. economy.
http://player.cnbc.com/p/gZWlPC/cnbc_global
"I don't think we're going into a recession, I think it's whether we're growing at 1 or 2 percent," he said. "So the fact that you've got lower GDP, that's fine, but at the end of the day the U.S. economy is doing fine."
In fact, the hedge fund manager said, there are good openings for discerning investors.
"I don't think it's a time to panic, I think it's actually a time where you've got opportunities out there. Invest in solid companies and you'll end up doing pretty well," Lasry said.
The expert investor said he sees "a ton of opportunities" in the energy sector — but not in equities. Instead he said his firm is buying debt that sees a coupon of about 12 percent "while you're getting paid to wait."
He projected that, in the next two to five years, "you're either going to get paid off, or you'll end up owning these companies" as debt is converted into equity.
We were not the only one to notice Lasry's hypocrisy...
So Lasry - a big HY mutual fund holder - sees no big problem in HY market... Surprise!
— Tim Backshall (@credittrader) January 8, 2016
And now, as Reuters reports, in what is clear evidence of a run on his fund,
A junk bond fund run by billionaire Marc Lasry's Avenue Capital Management, which has experienced heavy investment losses and investor withdrawals, has stopped voluntarily reporting daily asset figures to the mutual fund industry's top two tracking firms.
Research chiefs for Morningstar and Lipper said on Monday they had not received daily asset under management figures from the Avenue Credit Strategies Fund since about mid-December. The fund is not required to report the figures, but not doing so is "very unusual," said Jeff Tjornehoj, head of Americas research for Lipper, a Thomson Reuters unit.
People familiar with the situation said outflows from the Avenue Capital fund had become a distraction after an unrelated junk bond fund in early December imploded. Junk bond investors already were on edge, pulling $3.6 billion from high-yield funds in November, according to Morningstar data.
The Avenue Credit Strategies Fund has lost about 40 percent of its $1.2 billion in assets since the end of October. The fund currently has about $650 million to $700 million in assets, with about 15 percent in cash holdings and less than 5 percent in illiquid investments, according to people familiar with the situation. Avenue Capital was not immediately available to comment.
And so another one bites the dust and the forced expulsion of assets into an already illqiuid market continues (unless, like Third Avenue, the SEC grants them exemption from providing liquidity to their clients - the moms-and-pops of America - who were forced by Fed repression into these risky assets, only to eat the losses on the way out)
The only question is whether Lasry, who is a close personal friend of the Clintons - recall Chelsea Clinton launched her "career' by working as an "analyst" at the very same Avenue Capital in the mid-2000s - and who was slated to become US ambassador to France until his ties to a shady poker ring were exposed in 2013, will use his executive privilege and request special treatment by the former, and soon future, first family.
If so, that will be the first case of a hedge fund bailout by the presidential family in history, and will make the political farce that are US capital markets even more comical.